China coal hub Shanxi to shut small mines to make way for majors' expansion

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BEIJING, Jan 22 (Reuters) - China’s second-largest coal mining province Shanxi will close all small coal mines and expand capacity at its biggest operators through mergers by the end of 2020, the latest effort to close outdated capacity and streamline a core industry.

The province plans to shut coal mines with annual capacity of less than 600,000 tonnes and make all remaining mines larger than 3 million tonnes per year, the Shanxi provincial government said in a statement on Monday.

Open-pit mines must have capacity of at least 5 million tonnes a year and must comply with stricter rules on consolidation and environmental protection as they are potentially more hazardous to water and air, and harder to clean up at the end of mine life.

The announcement comes after the central state planner said earlier this month it wants to form several “super-large” coal miners, each with capacity of more than 100 million tonnes per year, to enhance competitiveness in the industry as Beijing aims to shift the country away from dirty coal and boost clean energy.

The Shanxi plan also follows the acquisition last year of state power company China Guodian Group Corp by China’s top coal miner Shenhua Group Corp to create the world’s largest utility, one of the country’s biggest state-orchestrated deals so far.

China, the world’s biggest coal miner, produced 3.45 billion tonnes of the fuel in 2017, up 3.2 percent from the previous year, boosted by robust demand from industrial plants.

Coal miners in Shanxi will be encouraged to merge with nearby mines or others located in different regions, according to the statement.

At end-December, Shanxi had a total 909.8 million tonnes of annual coal capacity, according to the province’s coal administrative bureau. Its 2017 output was 875 million tonnes.

To ensure financing capital for the consolidation measures, Shanxi said it would encourage coal companies to list on stock exchanges and the financial sector to spur mergers and acquisitions in the industry.

The government has given the province’s top five coal groups and cities until end-March to draw up plans for consolidation, it said. The five coal groups are Shanxi Coking Coal Group, Yangquan Coal Industry Group, Datong Coal Mine Group, Lu’An Group and Shanxi Jincheng Anthracite Mining Group. (Reporting by Muyu Xu and Josephine Mason; Editing by Tom Hogue)